The Supreme Court of Appeal (SCA) opened the door for investors in the Highveld Syndication (HS) 21 and 22 to institute legal action against property magnate Nic Georgiou to repay their investments.
The SCA on Friday dismissed Georgiou’s application for leave to appeal against a 2015 summary judgement by high court judge AJ Hiemstra. Hiemstra ordered Georgiou to repay Ms Anne-Marie de Lange her initial R520 000 investment plus interest in the Highveld Syndication 21 company.
The judgement also means that Georgiou would have to repay all 45 other investors who instituted similar claims with De Lange in 2015.
When Georgiou filed a notice of his intention to defend the claims of these investors, the parties agreed that the outcome of the application for leave to appeal against De Lange’s judgement would also be binding on the other 45 investors. This means that Georgiou will also have to repay around R30 million to these investors.
Louis Bolt, the advocate who represents these investors, said this judgement means other investors in the Highveld 21 and 22 schemes can now institute similar claims. “This judgement now exposes Georgiou to claims in excess of R3 billion.”
He warned that other investors who also want to institute claims need to hurry, as all claims may prescribe (lapse) early in 2017.
The judgement does not affect the investors in the other HS schemes as their investment contracts did not contain buy-back agreements.
The reason for this is that the HS 21 and 22 investors’ contracts contained a specific buy-back clauses that not only gauranteed yields, but also that the shares would bought back after five years of the investment date.
Georgiou reneged on this guarantee.
Bolt added that it is almost ironic, as this judgement will ensure that when Georgiou has bought these shares back in terms of the judgement, he will be one of the largest shareholders in HS 21 and 22. “He will then be subject to the provisions in the Orthotouch scheme of arrangement which he and business rescue practitioner Hans Klopper have implemented. According to this scheme he will receive his capital back, as well as interest of 2% per annum.”
Jacques Theron of Theron and Partners, and a member of the Highveld Syndication Action Group (HSAG) that is pursuing a class action suit against Georgiou on behalf of other HS investors, welcomed the judgement. “This is a major victory for justice. It not only paves the way for the 46 investors, but has also settled the law for all the other HS (21 and 22) investors.”
Theron added that the HSAG will consult its legal council next week to discuss the “possibility to commence legal action for HSAG members against Mr Georgiou in his personal capacity, as well as his relevant entities.”
Moneyweb sent questions to Georgiou but he had not responded by the time of publication.